Pat Sweet

The Treasury has announced a zero-rate of VAT will apply to sales of PPE for Covid-19 from 1 May 2020 until 31 July 2020, in a move it says will save care homes and businesses more than £100m.

The government said it has acted as soon as possible to bring the measure into force. EU law governing VAT, which the UK is bound to follow during the current transitional period, requires the UK to charge VAT on the equipment.

The government is acting under an exceptional basis allowed by EU rules during health emergencies. The European Commission recently indicated support for member states to introduce temporary VAT reliefs to mitigate the impacts of the Covid-19 pandemic.

The Treasury says the cut in VAT will particularly benefit care providers, who are often unable to reclaim the 20% VAT they incur on their purchases.

Blick Rothenberg said the decision to remove VAT on domestic sales of PPE sales, following the earlier removal of VAT on imported PPE, will also help businesses wishing to protect their staff once the lock down is eased.

Alan Pearce, head of VAT at the firm, told Accountancy Daily: 'With the rumoured opening up of schools, this will also allow them to buy PPE without additional VAT costs. Many other businesses may also be investing in PPE for their staff in advance of the phased relaxation of the lockdown.

'Although many businesses would be able to claim refunds of the VAT, for those in the finance and insurance sector, as well as in the health, education and charitable sectors who suffer VAT on their costs, this temporary zero-rating be a boost for them as well.'